In recent months, the real estate market has started to turn around, thanks to a tax credit for first-time home buyers.

In 2010, the effects of the tax credit, which was extended and expanded to existing homeowners, will be muted compared to 2009. That's because many who wanted to buy have already done so, and existing homeowners who want to take advantage of it will have to sell or rent their existing home first, Agarwal said.

About 85 percent of Hampton Roads' market is resale or existing homes. Inventory of those was up to 10,096 at the end of December. That's the second-highest inventory of homes since at least 1995, trailing 2008's high of 10,622, and more than four times the inventory in 2003, when the housing market began to heat up.

It'll take about seven and a half months, at the current sales pace, for all the homes listed on the market to sell, an improvement from the 10.1-month supply last summer.

Inventory is lower — 6.1 months — for prices in the $175,000 to $225,000 range, and significantly higher for upper price ranges. It'll take nearly two years — 23.4 months — to exhaust homes listed for sale at prices greater than $521,000.

High inventory, coupled with higher-than-ever numbers of foreclosures and short sales, will likely depress prices by 3 to 5 percent in 2010, Agarwal said.

The median sales price of existing homes has already fallen 7 percent in 2009 to $207,000, from the 2007 peak of $223,000.

On the upside, it's still more than double the median sales price of $99,900 in 2000, according to the report.

Agarwal forecasts an uptick in new construction, which came to a near-standstill since the housing boom. Building permits in Hampton Roads have declined every year since peaking in 2003. It's since fallen by about 64 percent in 2009.

Foreclosures and short sales continue to be a bigger-than-ever segment of the housing market.

In 2009, about a quarter of 1 percent of sales were "distressed," meaning they were bank-owned homes or short sales.

That was up to 18.1 percent of sales in 2006.

And it's not over yet.

Nationally, short sales and foreclosures will likely peak in 2010, ODU economics professor Gilbert Yochum said. But the threat of foreclosures will loom for the next few years, with a wave of resets from adjustable-rate mortgages that will continue into 2012, he said.

"We're going to call this cleaning out skeletons in the closet," Yochum said.

The good news is that buying a home is more affordable than it's been in years, Agarwal said.

It cost about 24.9 percent of the median household income to afford the monthly payment of a median priced resale home in Hampton Roads in 2009, based on a 4.9 percent mortgage rate, according to the report.